The use of company seals in the UK is not necessary, and they are not commonly used. Historically, a company seal is simply a way of making documents legal, such as deeds and agreements. They are still used by some companies, however, for foreign contracts and property transactions. In this article, we will explain all that you need to know about company seals in the UK, including whether their use is necessary, their purpose, the UK regulations on company seals, and why some companies still use company seals.
What is a company seal in the UK?
A company seal, also known as a ‘corporate seal’ or ‘common seal’, is a stamp used by companies in England and Wales to prove that a document has been approved by an authorised person. Company seals are typically used to approve documents such as deeds, agreements, and share certificates. As such, a company seal can be thought of as a company signature.
Your company seal must be engraved and clearly show the full name of your registered business.
What forms do company seals take?
Company seals can take different forms, including embossing and wax stamps. A small device called an ‘embosser’ is the most common way to stay to seal a document. An embosser has a lever (a desk embosser) or handles (pliers embosser) and two plates. The plates are embossed with the company details. The document is placed between the two plates, and when the lever is pressed (or the handles are squeezed), the company information is indented onto the paper.
Pliers embossers are handheld and tend to be lightweight and portable. Desk seals, on the other hand, tend to stay on a desk and are typically of a heavy-duty design. Desk seals are used by professionals who need to seal documents on a regular basis and for sealing thick paper (i.e., a gsm of over 100).
UK regulations on company seals
Section 44 of the Companies Act 2006 sets out the law on the use of company seals in England, Wales, and Northern Ireland (not Scotland); it states:
1. Under the law of England and Wales or Northern Ireland, a document is executed by a company—
(a) by the affixing of its common seal, or
(b) by signature in accordance with the following provisions
2. A document is validly executed by a company if it is signed on behalf of the company—
(a) by two authorised signatories, or
(b) by a director of the company in the presence of a witness who attests the signature.
The key point to note here is that companies in England and Wales or Northern Ireland have the option to execute a document using a company seal or signature. This means that company seals are not mandatory, and it is possible to use two authorised signatories or the signature of a director as long as it is witnessed.
Authorised signatories include company directors and the company secretary. If the company does not have more than one authorised signatory, the signature must also be properly witnessed. This will be the case if you are the sole director of your company.
Are company seals still used?
Yes, company seals are still used, but where they tend to take the form of an embossment rather than a wax seal. The use of company seals has reduced considerably in recent decades, due in large part to the digitisation of business.
When are company seals used?
Company seals are used to execute documents and deeds of a range of types, including (but not limited to):
- Invoices
- Overseas business contracts
- Residential and commercial property deeds, leases, contracts, and agreements
- Articles of association
- Board meeting minutes, and
- Share certificates
Are company seals mandatory in England, Wales, or Northern Ireland?
Company seals are not mandatory in England, Wales, or Northern Ireland. This is set out in section 45 of the Companies Act 2006, which states:
1. A company may have a common seal, but need not have one.
2. A company which has a common seal shall have its name engraved in legible characters on the seal.
3. If a company fails to comply with subsection (2) an offence is committed by–
(a) the company, and
(b) every officer of the company who is in default.
4. An officer of a company, or a person acting on behalf of a company, commits an offence if he uses, or authorises the use of, a seal purporting to be a seal of the company on which its name is not engraved as required by subsection (2).
5. A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.
This section of the Companies Act makes it clear that while a company may have and use a company seal, it is not mandatory. If they do use one, however, it must contain the name of the company clearly engraved. Indeed, it is an offence under law to use a company seal that is not clearly engraved with the company name.
Model articles of association for private companies
Section 49 of the model articles of association used by many companies during the incorporation process states the following:
1. Any common seal may only be used by the authority of the directors.
2. The directors may decide by what means and in what form any common seal is to be used.
3. Unless otherwise decided by the directors, if the company has a common seal and it is affixed to a document, the document must also be signed by at least one authorised person in the presence of a witness who attests the signature.
4. For the purposes of this article, an authorised person is—
(a) any director of the company;
(b) the company secretary (if any); or
(c) any person authorised by the directors for the purpose of signing documents to which the common seal is applied.
It is important to check your company’s articles of association. It may require, as the model version sets out above, that a company seal be accompanied by the signature of a director or company secretary. This can be avoided, however, by agreeing a board meeting motion that the use of the company seal does not require the addition of a signature by an authorised person.
Why do some companies still use company seals?
Some companies prefer to use company seals for a number of reasons, including:
- Tradition and formality – some companies prefer the additional level of formality involved in executing a document in this manner.
- Property transactions – there is a statutory presumption of due execution set out in section 74(1) of the Law of Property Act 1925.
- To meet the legal requirements in a foreign jurisdiction, this may be important if you are planning to operate or trade with clients in other countries.
Other reasons to use company seals include reducing levels of fraud and enhancing the credibility of the business.
Can I use a digital company seal?
The rules state that a company seal must contain the company name engraved in legible characters. Other bodies have made it clear that electronic seals are not acceptable. In response to the Law Commission’s consultation on the electronic execution of documents in 2018, the City of London Law Society stated: “It would seem to be a criminal offence under Companies Act 2006 s 45(4) for a UK company that has a seal to use an electronic seal”. In addition, HM Land Registry states in its practice guide on electronic signatures, “We think that there must be doubt as to whether a company can use some form of electronic common seal as section 45 of the Companies Act 2006 appears to envisage a physical seal. We will not, therefore, accept documents sealed electronically by a company”.
Company seals summary
| What is a company seal? |
A company seal (or common seal) is used to stamp official documents, signifying company approval. |
|---|---|
| Is a company seal mandatory? |
No, companies in England, Wales, and Northern Ireland are not legally required to have a company seal, but they may choose to use one. |
| Legal requirements |
The Companies Act 2006 removed the requirement for UK companies to use a seal. Authorised signatories can now execute documents. |
| Who can use a company seal? |
If a company opts to use a seal, its directors or authorised persons must oversee its use. |
| When are seals used? |
Seals are commonly used on share certificates, deeds, and international contracts where stamping is required. |
Final words
We hope you have found this guide to company seals in the UK useful. As we have discussed, the company seals are not a legal requirement in England, Wales, and Northern Ireland under the Companies Act 2006. This, along with the digitisation of company documents and contracts, means that company seals are not frequently used. Some companies still use company seals for tradition and to benefit from the statutory presumption of due execution for property transactions.
Uniwide Formations Ltd specialises in the registration of limited companies and LLPs. As professional business service providers, we offer a wide range of company formation packages to suit your needs. To discuss any of the points raised in this article, please call us on 020 4501 0600.